PESTEL ANALYSIS - UNILEVER GLOBAL

PESTEL analysis - UNILEVER

A scan of the external macro environment in which the firm operates can be expressed
in terms of following factors:
Political
Economical
Social
Technological
PESTEL analysis is a useful strategic tool for understanding market growth or decline,
business position, potential and direction for operations. The headings of PESTEL are a
framework for reviewing a situation, and can in addition to SWOT and Porters Five
Forces models, be applied by companies to review a strategic directions, including
marketing proposition. The use of PESTEL analysis can be seen effective for business
and strategic planning, marketing planning, business and product development and
research reports. PESTEL also ensures that companys performance is aligned
positively with the powerful forces of change that are affecting business environment
(Porter, 1985). PESTEL is useful when a company decides to enter its business
operations into new markets and new countries. The use of PESTEL, in this case, helps
to break free of unconscious assumptions, and help to effectively adapt to the realities
of the new environment.

Limitations of PEST analysis

Political factors include government regulations and legal issues and define both formal
and informal rules under which the firm must operate. Economic factors affect the
purchasing power of potential customers and the firms cost of capital. Social factors
include the demographic and cultural aspects of the external macro environment. These
factors affect customers needs and size of potential markets. Technological factors can

lower barriers to entry reduce minimum efficient production levels and influencing
outsourcing decisions.
It may be difficult to forecast future trends with an acceptable level of accuracy. In this
regard, the firm may turn to scenario planning techniques to deal with high levels of
uncertainty in important macro-environmental variables

Political and legal analysis

Unilever is subject to local, regional and global rules, laws and regulations. These rules
and regulations cover diverse areas such as product safety, product claims, trademarks,
copyright, patents, employee health and safety, the environment, corporate governance,
listing and disclosure, employment and taxes. Important regulatory bodies in respect of
business include the European Commission and the US Food and Drug Administration.
Failure to comply with laws and regulations could leave Unilever open to civil and
criminal legal challenge and may result in fines or imprisonment of personnel. Further,
reputation could be significantly damaged by adverse publicity relating to such a breach
of laws or regulations.
During 2009-2010 almost 49% of Unilever revenue came from D&E markets including
Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets
typically proved more volatile than developed markets. Any government response to
reduce the impact such as fiscal stimulus, changes to taxation and measures to
minimise unemployment have also affected Unilevers economic performance.
In some regions Govt. has imposed heavy duties on imports and raw materials and it
has a negative impact on production capacity. However, Unilever is quite good in
managing relations with Governnments.

Economic analysis
Unilever market environment is becoming highly competitive especially in the Western
Europe. Macro economic environment is highly uncertain whcih has affected micro
economic environment as well by creating a fear among ordinary consumers.
Consumers

would not want to buy expensive product or brands due to current

economic tide. Competition in EU has grown so strong that Unilever is facing difficulties
in places like France, Netherlands.
Economic Decline in business during an economic downturn has resulted in customer
and supplier default. Unilevers business is dependent on continuing consumer demand
for its brands. Reduced consumer wealth driven by adverse economic conditions has
resulted in consumers becoming unwilling or unable to purchase Unilever products,
which has adversely affected cash flow, turnover, profits and profit margins. Adverse
economic conditions have resulted in the impairment of some of intangible assets which
are in the form of brand names. Adverse economic conditions have affected in two ways
i.e. one or more countries within a region or extended globally. However, recession has
increased the demand for some of the home care products. Unilever is operating in
different market, which have reacted to recession in different ways. In D&E markets
volume led growth has been improved upto 7% in the first quarter of 2010.

Societal and Ecological Analysis

Unilever has developed a strong corporate reputation over many years for its focus on
social and environmental issues, including promoting sustainable development and
utilisation of renewable resources. It is very conscious about safety and health of its
employees and accident rate decreased by 9% during 2009.
Unilevers vision is to help people feel good, look good and get more out of life with
brands and services that are good for them and good for others.
It has successfully maintained high social and environmental standards by designing
and producing products that are safe for consumers. Unilever is working on so many
social welfare projects like World food programme and safe drinking water. Unilever is
using environment friendly materials and packing stuff.The Unilever brand logo now
displayed on all products and advertising, increases its external exposure. Unilever has
built its image as an environment friendly and socially responsible company

Technological Analysis

Unilever has been spending on IT to improve its business especially in the area of ebusiness so as to improve brands image and quality of its products.
Unilever know that failure to provide sufficient funding to develop new products, lack of
technical capability in the R&D function and quickly roll out the products may adversely
impact its cash flow, turnover, profit and profit margins and affect reputation.
High level of automation is one of the critical success factors of Unilever that
differentiates then from their competitors and serves as a source of competitive
advantage. Today, Unilever is trying to minimize cost through IT efficiencies at global
level. In addition, Unilever Technology Venture works in collaboration with Unilever R&D
group to help Unilever meet consumers needs. Area of concern is genomics, advanced
bioscience, advanced materials science and nano technology.